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Non-Linear Market Demand and Capital Accumulation in A Differential Oligopoly Game

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  • R. Cellini
  • L. Lambertini

Abstract

We investigate a differential oligopoly game where firms compete in account Market whose demand function is always downward sloping but can take any degree of curvature. There exist two economically meaningful saddle points, one dictated by demand conditions, the other by the Ramsey rule. In steady state, optimal capital is non-decreasing in market size. Then we show that the socially efficient output is independent of the curvature of market demand. This entails that the welfare loss associated to the Cournot equilibrium decreases as market size increases.

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  • R. Cellini & L. Lambertini, 2000. "Non-Linear Market Demand and Capital Accumulation in A Differential Oligopoly Game," Working Papers 372, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:372
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    Cited by:

    1. Baldini, Massimo & Lambertini, Luca, 2011. "Profit taxation and capital accumulation in a dynamic oligopoly model," Japan and the World Economy, Elsevier, vol. 23(1), pages 13-18, January.
    2. R. Cellini & L. Lambertini, 2003. "Capital Accumulation and Horizontal Mergers in Differential Oligopoly Games," Working Papers 477, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Calzolari, Giacomo & Lambertini, Luca, 2007. "Export restraints in a model of trade with capital accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(12), pages 3822-3842, December.
    4. R. Cellini & L. Lambertini, 2008. "Weak and Strong Time Consistency in a Differential Oligopoly Game with Capital Accumulation," Journal of Optimization Theory and Applications, Springer, vol. 138(1), pages 17-26, July.
    5. Giacomo Calzolari & Luca Lambertini, 2006. "Tariffs vs Quotas in a Model of Trade with Capital Accumulation," Review of International Economics, Wiley Blackwell, vol. 14(4), pages 632-644, September.
    6. R. Cellini & L. Lambertini, 2001. "Differential Oligopoly Games where the Closed-Loop Memoryless and Open-Loop Equilibria Coincide," Working Papers 402, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. R. Cellini & L. Lambertini, 2002. "Advertising with Spillover Effects in a Differential Oligopoly Game With Differentiated Goods," Working Papers 430, Dipartimento Scienze Economiche, Universita' di Bologna.

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